Before I get going, let me start out with the usual disclaimer. I’m not a Bitcoin expert, nor do I claim to be. I love people who live and breathe Bitcoin every day, and I have the utmost respect for all of you, but that’s not me. As you can tell from a quick glance at my website, my current focus revolves around the current political environment as well as the geopolitical implications of a declining U.S. empire. That said, I’ve been involved in Bitcoin since 2012, and I care deeply about it. In my opinion, globally interconnected humans functioning within decentralized systems of economics and political governance provide the best framework for the human species going forward. We have the tools, we just need the desire.
Today’s post is about an alt-coin that is about to fork from Bitcoin, led by a contingency in the civil war known as the big blockers. This piece is not meant for newbies, but is written for people who own Bitcoin and already have a good understanding of all the drama that’s been going on, and may continue to periodically resurface after August 1. If you aren’t already up to speed on these things you should probably stop reading. The post will just sound confusing and won’t have much impact on your decision making anyway.
First of all, I don’t think there will be any debate around what the “real Bitcoin” is following the fork and creation of an alt-coin called Bitcoin Cash (BCC). This coin will be a pet project of big blockers wanting to both save face, and also potentially hurt the original Bitcoin (BTC). Only time will tell if some of those considered “bad actors” will try to target the original Bitcoin out of pettiness, but you should never underestimate what people with a lot of money/power and huge egos will do. History is replete with the ruins of the crazed actions of these types.
If you control your private keys, you should be able to access BCC sometime after August 1st. Some people are describing this as a dividend, although it seems more like an asset spinoff to me. Either way, BCC will have some sort of value on or around August 1st, and a market will start being made. So how should people concerned about potential bad actors on the side of BCC think about all of this? Let’s start with a few tweets from Whale Panda that I think are important to ponder.
Then when the 2x part of Segwit2x wont activate, they will dump $BTC hard and pump $BCC claiming it is the original/legacy #Bitcoin.
— WhalePanda (@WhalePanda) July 25, 2017
With that in mind, take a watch of this recent interview of Roger Ver. Roger is considered to be one of the largest holders of Bitcoin, and owns bitcoin.com
That video definitely made me feel that Roger could act in a hostile way following the launch of BCC. I really hope he swallows his pride and doesn’t go down that route, but we can’t make that assumption. I think we absolutely need to prepare for the possibility that some bad actors will try to harm Bitcoin using BCC. Here are a few more tweets from Whale Panda.
Since I think Whale Panda is onto something, the most logical way to defend against the threat from a market psychology perspective is to hold onto your BCC even if you think it’s garbage. You have to understand that if bad actors want to make Bitcoin look bad, and their alt-coin look good, price will be a huge part of their strategy.
It might make sense to hold onto your BCC out of the gate in order to prevent bad actors from buying up the entire float. This would prevent them from then dumping their BTC on the market at a date of their choosing (while controlling all the BCC), thus and ensuring it goes up while Bitcoin drops. I’m not saying this is my assumption, I’m saying it’s possible. As such, consider holding on to your BCC to prevent a successful execution of this strategy. That way, if BTC does drop as BCC rises in a manipulated event, you have dry powder to take the other side of the trade. The risk in this strategy is that BCC crashes right away, never recovers, and you lose that free money, but if that happens you’ll still probably benefit from a rising BTC price.
At the end of the day, everyone should do what they feel is right. I could be completely nuts here. I’m just putting all of this out there in the event some of you haven’t thought through this potential outcome. I at least want people to be aware of what might happen, I have no idea of the likelihood of such a scenario.
Personally, I hope Roger, Jihan and whoever else don’t go down that route. If they do, they will be rightly demonized and remembered as the egomaniacs who tried to kill Bitcoin. Sure float your alt-coin and let people choose, but don’t start playing nefarious games. If you do, the Bitcoin community will rally together like never before and it won’t be good for you. I ask that you peacefully stand down.
For a prior piece on the topic, see:
It’s Time to Fight Fire with Fire – Is the Chinese Government Pushing Bitcoin Unlimited?
If you appreciated this post and want to drop me a little Bitcoin: 1ArSt9rxBCHgi9ddV3aJSK1dL97gRLimGS
In Liberty,
Michael Krieger
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Hi Michael,
First, I just want to give you an idea of my level of Bitcoin-knowledge, before I pose a thought on the subject.
I too, am no Bitcoin-expert, but I think you are more expert in it than I am.
On the other hand, I haven’t exactly been living under a rock either. I learned about bitcoin and the altcoins in 2013 and immersed myself somewhat in it but ultimately not enough, I have created a Bitcoin-wallet or two but I consequently did little to nothing with it. Mined some altcoins on my computer for a short time for fun. And then I ignored the subject for a few years. Now in the last few months I have immersed myself some more in it and I now have more understanding why Bitcoin (or another altcoin) is here to stay: it’s about the underlying technology that enables decentralized trust and will give rise to new technologies and that might ultimately might even wipe centralized corporations institutions away (unless Bitcoin or the altcoins are co-opted by them). As Andreas Antonopoulos says: blockchain is a disruptive technology and is now where internet was in the early to mid-nineties. This is in short my level of understanding of the cryptocurrencies.
So you might very well have a good point about Roger Ver, but I’ve watched the video of Roger Ver you posted and I have read some of this tweets. I don’t know about his motivation: it might be perfectly legit or it might not, but I do know that he really is a Bitcoin-expert. More so than you or I.
So my thought is this: what if he’s right in the things he telling us in the video and in his tweets?! I don’t know, but it could be worth thinking about and trying to figure out what he means.
In any case, thank you for your thoughts!
Hi Mason. My big point is not to say who is right or wrong here. I can’t say for sure. What I do think is Roger comes across as an egomaniac and someone willing to use power and money to force his way on others. This goes against the ethos of Bitcoin.
As such, I see the potential for him to marshal his resources into a price attack on BTC. I am providing a strategy to counter than potential outcome.
Michael,
You have been listening to the propaganda from Blockstream. I humbly suggest that you listen to the Roger Ver interview again with an open mind. The real bad actors in this drama are the blockstream developers. They are trying to turn Bitcoin into a settlement layer for their own private network called Lightning. They own the 2 major discussion sites on the internet and have systematically silenced dissenting opinions. This leaves them as the “authority” that all should follow blindly. For the love of god, please don’t willfully put yourself in that position. Listen to other opinions, don’t just resort to name calling.
It’s true I called Roger Ver an egomaniac. This is my observation from watching him over time, and I’m not the only one who has come to that conclusion. Either he is an egomaniac, or he is coming across as one. Either way, that’s something for him to work on, and his personality and manner of communicating is definitely hurting his cause.
Maybe I am totally wrong, could be. What I am saying is that I don’t want to see a nefarious price attack by the BCC guys on BTC, and I am providing a strategy to counter such a move.
Who have you been rubbing shoulders with Michael? Whoever’s been in your ear has got it all wrong, Segwit is the altcoin Bitcoin could be forking from. Bitcoincash only happened once blockstream’s slow, insidiously pathway steering bitcoin away from the original paper became clear. They want to cripple the existing chain by adding a sidechain, like calipers for damaged bones. BCC is acting true to what Bitcoin is all about – competition – it introduces choice for those that have had enough of one particular group controlling btc’s narrative. Of course time will tell, meanwhile I’m adding this blog to the people who got it wrong list.
“Of course time will tell, meanwhile I’m adding this blog to the people who got it wrong list.”
You claim “time will tell,” but then immediately say I am already wrong. You should take a course in Logic 101.
That said, yes I could be wrong, as I made clear on numerous occasions throughout the post. It wouldn’t be the first time I was wrong, nor would it be the last.
Also, I appreciate you letting me know of my inclusion on your creepy list of people who “got it wrong.” Not quite sure how I will go on.
Hi Michael, first, the disclaimer – like Mason above, I am also far from an expert on the topic of Bitcoin, and what is more I do not even have any practical experience of it. However I do study currency issues and financial markets, so will be commenting from a ‘political economy’ perspective.
If we consider the socio-politico-economic functionality and basis of currencies, analysts tend to focus on the classic three functions of money – as a medium of exchange, as a store of value and a measure of value. Whilst these are undoubtedly important, they do not exhaust the existential conditions and purposes of money. I’m not going to list all the remaining ones, as some of them are off-topic, but two are particularly important in this context – firstly, that money acts to bestow power in the community, particularly for those who issue it, and secondly, that functional money must ultimately be backed by the provision of the most basic and useful goods and services. Whilst it may appear that this last aspect of money is adequately contained in the notion of money as a store of value and a measure of value, it is qualitatively different in that stores and measures of value in the classic sense cannot protect against money having a temporary artificial value when society persistently produces only what has low or even negative intrinsic value, leading to sustainability issues.
Whilst I am certainly not against digital money per se, or the blockchain in principal, I suspect that Bitcoin and its ilk will prove to be interesting experiments rather than genuine solutions to the problem of centralized, elitist money. Bitcoin (which I will concentrate on as the prototype) may claim to be decentralized and non-elitist, but that is an illusion when in reality it is largely the plaything of a tiny privileged minority of educated and techno-savvy people with access to computing power and large amounts of energy. It may be backed by ‘work’ in the form of mining, but this hardly constitutes productive work in terms of providing essential goods and services. (Here I am setting aside the Modern Money Theory argument that money needs to be accepted for taxes in order to be truly legitimised and universally fungible, which is true in the centralised economies we are used to, but does not have to be the case if political power is more defused – which would definitely be a good thing!)
Throughout history and today too there are numerous instances of successful currencies that were both decentralised and non-elitist, and hugely successful in stimulating productive work and social happiness – which should after all be the purpose of money! What they tend to have in common is that they are locally based and controlled and completely understood by all of the local community, and also completely backed by productive work. Therefore, they are/were also directly linked to, and nurturing of, local productivity. A few examples are the Curitiba in Brazil, the WIR system in Switzerland and the Worgl in 1930s Austria. I think it is a great shame that these and other similar examples are not more widely known about and discussed, as they have really proved their worth, whereas the benefits of Bitcoin remain largely speculative and inextricably attached to some of globalised utopia where personal contact and knowledge is even more devalued than it is now. Is that really a desirable prospect that will encourage sustainable living and community values? Why settle for currencies that are unable to encourage this when there are marvellous, low-tech alternatives?
PS I do want to add that I do not believe that a monopoly of one particularly kind of money is ideal in any system, so there is no reason why something like Bitcoin couldn’t be used in certain circumstances eg international payments.
“I own a lot of Bitcoin Cash”
Yes… He said that very pompously with more than a hint of POWER in his capacity to manipulate at whim. hmmmph
I’m in Bitcoin from 2012.
I own a nice quantity of bitcoins (nice from my PoV).
I’m pretty against SegWit (and Core and Blockstream as a consequence)
They stalled for years on chain scaling. They found always different reasons for doing so. It is tedious, but if people has a good memory, they can recall some of it. It is a story of shifting narrative, not different from what politicians do every day to fuck up people with people consent. The ones not towing the party line are relentless attacked, ostracized, badmouthed and so on.
Bitcoin is defined by the chain of digital signatures. No one can fake or deny a digital signature. ANd, if it is in the blockchain, no one can take it out without doing again the PoW of the block that included it and every block following that.
With SegWit, without the signatures (that are segregated in another place) we lose the traces of who own what. They are all stored in ANYONECANSPEND transactions and who own them is defined by another data structure outside the blockchain. The protection is no more the digital signing, it is the majority of the hash rate. If the majority change and decide to not honour the SegWit soft-fork rules, the owners can not do anything. They could not even be able to prove they are the real owners of their own coins. Robosigning anyone?
The Witness data is checked AFTER the transaction data, maybe after the next block and the one after it were already found. This incentive the miners to not check the block and the witness before mining a new full block. The incentive is to TRUST the previous miners. Not a good idea for a trustless network.
Now that is interesting.
I can not assess to which extent you are true technologically, bur taking you words for face value….
> The protection (with SedWit) is no more the digital signing, it is the majority of the hash rate (maj. of miners).
So you say this move gives miners more power than they have now. Why to oppose such a move? Does not click.
> we lose the traces of who own what
So, the blockchain looses its essential “zero anonymity” property.
Currently all those pseudonymous wallets transactions can be traced eternally. Mixers can probably be made into cooperating with authorities. With BTC expanding to everyday purchases like groceries or transport tickets or premium features in social networks, mapping pseudonymous wallet to specific John Smith would be trivial. Oh, of course 1% would still have figureheads hired nominally owning their money and taking all the responsibilites. But for next door salarimen it would be a total and eternal exposure towards international authorities.
Now Core go nuts and try to sabotage it introducing plausible deniability.
Who would tolerate this?
> With SegWit, without the signatures (that are segregated in another place) we lose the traces of who own what.
No, that’s not how it works. The signatures are logically separated from the main block in order to avoid having to hard fork to increase the block size, which is limited by a consensus rule to 1 MB. But the signatures are still part of the block, and all validating full nodes will of course validate the signatures.
It’s true that you are free to not download the signatures if you don’t want them. You can also delete them once you’ve validated them. But that’s no different than the current situation. Right now you can delete the whole block, including its signatures, after validating it. Some people don’t even download the blocks at all, can you imagine?
This “anyone can spend” FUD is just that. SegWit is no more “anyone can spend” than P2SH is. P2SH (which gave us multisig, for example) was also introduced by a soft fork, and also allows the miners to cheat and steal money *if nobody is checking whether they are enforcing the new rules or not* – and that’s the point. We *will* be checking whether they are enforcing the rules, and rejecting their blocks if they are not.
SegWit is an elegant solution to a hard problem: how can we increase the network capacity without a contentious hard fork. I see nothing approaching a solution to the problem from anyone other than the Core team.
Okay, so SegWit-2MB seems to got kickstarted.
Many people around speculate at how evvvvul BU/Chinese/Asian miners would cheat and sabotage, and while signalling SegWit2x support never actually implement SegWit blocks.
Funny, none of them seem to care about mirroring case, that BU hive DOES commit to their promises and does enable SegWit, then 6 months later good Core folks forget to make they part of compromise and sabotage switch to 2MB blocks.
I do not tell any of this would happen, but the very idea of unbiased suspicion should cover both cases.
More so, objectively Core-size cheating is of higher probability: as the pressing needs would be solved by SegWit and as the flames would die out during 6 months of peace – silently forgetting another side of the deal would be easier than spectacularly breaking the SegWit promise would be now. Still only a latter risk seem to be hyped mostly.
> SegWit is an elegant solution to a hard problem: how can we increase the network capacity without a contentious hard fork
It is nor the solution though, it is yet another temporary pushing the borderline. Just like was 256K->1MB switch before. SegWit+2MB promises to create 4 times the room, so it is literary the same length step. Come few years, and even SegWit2MB blocks getting used up and all the show repeats from start for the third time….
Granted, no one checked if BU/EC proposal is practically secure and scaling. However if it would be – it could be the solution. Or some other technical/mathematical automatic procedure, that is not dependent upon human ego getting subdued by human consensus.
@WhalePanda: It isnt a coincidence that it is all Asian exchanges that have announced they are adding it.
….then what it is? Asian conapiracy against White Men?
Or what this non-Asian guy naming himself Panda tries to imply? Did he elaborate what he pointed at other than Yellow Scare?
Is Kraken – who announced today BCC trade as well – Asian exchabge too?
https://en.m.wikipedia.org/wiki/Kraken_(bitcoin_exchange)
Sounds fishy. It does nor seem in this was would be any fair side.
Different kinds of sharks perhaps, suggesting you to chose their poison and recruiting fanboys by any means necessary.
While I certainly think it’s fine to take exception to that tweet, I don’t think the way you responded is fair, basically implying he wrote it out of anti-Asian bias.
There has been concern for a very long time about Bitcoin mining concentration in China due to the fact that country is unquestionably very politically unfree. I think such concerns are completely justified given how stringently the Chinese government controls political life. It doesn’t make you prejudiced to point that out.
As far as exchanges/wallets, you are absolutely right about Kraken, but other large ones have not taken that stance, such as Coinbase and Bitstamp which both do not seem to be suppling support for Bitcoin Cash.
If the guy meant “chinese exchanges” he could just write that, without using uncalled euphemisms. If he literally meant “asian” not “chinese” then Asia has states quite opposed to China politically and economically, starting with SK and Japan, and to extent Vietnam and India.
So there seems little need to replace PRC with vague Asia.
Unless the guy wants to imply that all Asia is covertly controlled by PRC, which he did not elaborated to.
And unless he wants to make his tweet call for irrational, emotional reaction.
Just because why else he avoids calling China China?
If you think that BU/Core rift is over purely technological dispute and that sides started PR war, then such “slips of tongues” seem moves in that game.
As for “politically unfree” China, then who is “politically free”, USA?
Your very blog seems to suggest it is not.
Then USA-based Kraken readying itself to BU should imply cooperstion with American gov’t too not only with Chinese gov’t?
I wonder how GDP of both PRC and USA compares with uear total of BTC transactions, is that prey really that fat to any gov’t to care?
Some smaller-than-gov’t actors in both states surely can have their interests, but government?
I can only see for official China the interest in owning BTC as it is allegedly used to leak money by corrupt officials to their relatives in Canada. But for this goal, Beijing would be interested in smoothly working BTC and then use blockchain’s “all transactions are public” essence as the evidence to police. Crashing BTC would just make those clerks switch to altcoins for evading Chinese financial monitors, would not stop the very process.
Everyone knows Russia arms Taliban and compromises democratic American elections.
Now everyone knows China is meddling in BTC afairs. All 17 intelligence agencies asset this, etc.
In both cases those assesment could be true guesses or could be tools to hide collusions with other actors, smoke screens.
http://www.translate.ru -> http://forklog.com/igry-v-razmer-bloka-bitcoin-unlimited-dash-i-pravila-go/
Inferesting idea that the rift in BTC might be supported by teams behind Dash or other coins, which want BTC holders to flee – and to end in most currently marketed altcoin
I wish I could add something intelligent to the conversation, so here’s a stab. Stay the #$%& away from cryptos!
Bitcoin is a decentralised transaction technology on which limited supply tokens are exchanged. Hopefully the next generation of crypto will use the same transaction technology for work-backed (cost-backed) tokens.
When the creation of new tokens, or coins, has a well-defined cost (electricity, hardware ++) – then ask yourself what value would such a coin attain?
Hey MIke,
I believe you’re a sincere guy who understands markets. I understand why you would take the opinion that any actors threatening a compromise could be considered bad actors. I’ve been a hodler since 2011 and had the same opinion until a couple of weeks ago when I read this post by jstolfi which lays out the timeline, actors and events of how we got here so I thought I’d share it with you:
https://np.reddit.com/r/Buttcoin/comments/6ndfut/buttcoin_is_decentralized_in_5_nodes/dk9c27f/?st=j5qyw053&sh=f0179bdc
Blockstream NEEDS full blocks to force people onto their L2 solution. Their concerns about hard forks, bigger blocks, low full node count, are disingenuous. They don’t care if the blocks are big or small, just full. This may be their undoing as full blocks have proven in the real world to be extremely disruptive to bitcoin.
The “fee market” required to transition smoothly to Lightening Network never developed and will never develop because of inelasticity of supply. Wallet estimators cannot predict fees. Think about it, what happens to price when there is a bid and no ask? What do higher prices do in order to allocate a finite nonrenewable commodity? They destroy demand. The result of full blocks has been wildly fluctuating fees and confirmation times of days. In early June my $350 tx with a $7 fee sat in the mempool for ten days.
It took me so long to figure this out because I never imagined that people would actually conduct such a risky science experiment on bitcoin but that’s exactly what they are doing. This is what $70 million in VC funding can do.
Additional commentary on jstolfi’s post:
https://www.reddit.com/r/btc/comments/6nkuhe/coreblockstreamgreg_maxwell_explained_great_post/?st=j5pxxqjp&sh=038b4ac7
Original Feb 2013 link proposing Satoshi was wrong:
https://bitcointalk.org/index.php?topic=144895.0
In that post gmaxwell proclaims as if Moses on Mt Sinai “Blockchains can’t do fast and cheap,” and “Blockchains can’t scale.”
I’m gonna hold both coins but my expectation is that the mempool will back up again (which Blockstream thinks is GOOD remember) at which point BCC will have a tremendous advantage.
Cheers.
@Gustav
> … because of inelasticity of supply.
> … to allocate a finite nonrenewable commodity?
To make supply elastic and commodity increasable BitCoin needs a model and implementation of either
1) decrease of complexity of blocks, more probability of “lucky number” found during mining “digital ore”. IOW reversion of the whole concept of exponential growth of complexity (“ore exhaustion”) for PoW model, that is basis of original BitCoin strategy, or
2) automatically-tuned no-human-intervention-needed growing block size, like EC or any other model. Oooops, what a heresy!
I never told it!
Addendum:
A point I failed to make in the above post is the fact that Segwit2x really isn’t a compromise because the two sides are irreconcilable. Therefore it just buys time. The two positions can be fairly reduced to:
-Blockstream/Core want bitcoin to act as a settlement layer
-Bitcoin Cash wants on-chain transactions
A true compromise of these two positions does not exist.
We all want micropayments and they must occur off chain. But that layer 2 design must not disrupt bitcoin’s growth in the process. The fact is that Maxwell’s prediction that a fee market would develop was dead wrong and showed a lack of understanding of how markets work. (A good question is how’d he get $70 million for such a flawed idea? Perhaps AXA Group saw the potential of monopolizing LN payment hubs.)
If LN is so great then why force people to use it through high fees and slow conf times? It reeks of central planning. If Blockstream/Core really do need full blocks and a fee market to implement LN then they are in big trouble because it has been proven it won’t work. Here’s the Mike Hearn article that in 2015 predicted the high fees and slow conf times resulting from full blocks:
https://medium.com/@octskyward/crash-landing-f5cc19908e32
I believe there is a much bigger picture to this UAHF issue. China/Russia and other state actors that are sick of the USdollar hegemony may be working to further undermine the petrodollar players with blockchain currencies that the bankers don’t/can’t control. The western banks are rushing into blockchain products, but they will be too late for the smart money holders–gold/silver/cryptos. I think the crypto geeks need to look at a larger picture for why the blockchain is so important and being fought over increasingly by big players and corporate actors. THX
One last comment after I read this interesting quote from Roger Ver.
https://www.reddit.com/r/btc/comments/6qjbyz/erik_voorhees_ceo_of_shapeshift_i_will_be_bcc_as/dkxrhc6/
The miners will put up with Segwit just to get rid of Blockstream. Wow. If Blockstream/Core truly needs full blocks they will do what they’ve said they will do and not merge the 2x part of the code in November. The ball is now in their court. Hard to see how they survive if they do that.
Okay, I’m done, Good luck Mike. After BCC gets dumped we can always pick some up as an insurance policy. 🙂
When someone create a technology that allows people to encumber their own personal gold and add it to a blockchain “bank” the world will change.
Still decentralized, with multiple redundancies, but with tens of thousands of small, mostly hidden, private bullion vaults.
If you join the network with a single 1 kg bar, your fees for adding that bar to the blockchain will be high, but you will still be able to monetize that kg bar. If the decentralized GoldChain authority deigns that you must prove ownership, they will have access to the location of said 1 kg bar. That ensures that fraud is minimized.
With tens of thousands of these small private and remotely located banks, coupled with large repositories in countries like Switzerland, Singapore, and the Bahamas, the introduction of a gold backed Bitcoin- a GoldCoin- seems inevitable.
who will police police?
I am joining your GoldChain claiming having 10 kg of metal gold of 999 purity.
How you gonna reasonably check it?